China Lodging to explore apartments, shared offices

Officials for China Lodging Group said they believe expanding into the apartment and shared-office sectors is a natural extension of the hotel company

While hotels remain at the core of China Lodging Group’s business, the company’s executives said they will invest in apartments and shared offices.

During China Lodging’s first-quarter earnings call, CEO Min Zhang said the company has invested 113 million Chinese yuan ($17.3 million) in five apartment and shared offices companies. Contrasting with the “matured market in the West,” Zhang said Chinese apartments are mostly owned by individuals instead of corporations.

“Consumers are looking for good products with appropriate services,” she said. “The market potential for the apartment is huge, estimated to be over 1 trillion yuan ($153.3 billion). Right now, this market is still at its embryo and fast-growing stage with numerous smaller players.”

Apartments are a natural extension of the hotel business, according to the company’s founder and executive chairman Qi Ji, who spoke through an interpreter on the call. The company has invested in two apartment companies, he said, because China’s younger generation who lives in metropolitan first-tier cities can’t afford skyrocketing house prices like in New York and other large cities.

“We think we are naturally advantaged in a few things such as site acquisition, product design and daily operations,” he said. “So we want to apply our current experience in this into the apartment area. That's No. 1.”

Shared offices provide small- and medium-sized companies with a collaborative working space with full services, including restrooms and events, Zhang said. This model is more practical and cost competitive than traditional offices, she said, and the market potential is sizeable in first-tier and second-tier cities.

“We believe we can apply our know-how and expertise in brand building, site acquisition and development, as well as daily operations from our hotel experience to the apartment and office-sharing business,” she said.

The company’s pipeline has 632 hotels, he said, with 25 leased properties and 607 manachised and franchised hotels.